SEC clears Skye Bank’s Mainstreet Bank acquisition

Securities and Exchange Commission (SEC) has no objection against the acquisition of Mainstreet Bank Limited by Skye Bank Plc, clearing the way for Skye Bank to complete the acquisition process and begin integration of the acquired bank.

After regulatory review, SEC, the apex capital market regulator which also has the sole jurisdictional authority on mergers and acquisitions, has given”No Objection” consent to the acquisition.

The “No Objection” consent implies that SEC had reviewed the entire acquisition transaction and found that it duly complied with extant laws, rules and regulations and best practices. In a reversed case, any objection by SEC must be rectified before the closure of the transaction. In the event of irreconcilable objection, SEC is statutorily empowered to stop the transaction.

Ahead of the November 4 deadline, Skye Bank had on October 31 paid the 80 per cent balance for the full acquisition of the entire issued shares of Mainstreet Bank to the Asset Management Corporation of Nigeria (AMCON), thus making Skye Bank the new owner of Mainstreet Bank. It had earlier on October 9 paid the mandatory deposit of 20 per cent for the acquisition of Mainstreet Bank. The payment of the 80 per cent balance to AMCON wholly fulfilled the terms of the Share Sale and Purchase Agreement earlier signed by both AMCON and Skye Bank and now put the latter in ownership of Mainstreet Bank.

Regulatory filing obtained by The Nation showed that SEC had issued a “No Objection” letter to the Skye Bank’s Mainstreet Bank acquisition. Regulatory sources and major parties to the transaction confirmed the clearance.

Sequel to the clearance, Greenwich Trust Limited, a broker-dealer member of the Nigerian Stock Exchange (NSE), which is acting as professional adviser to Skye Bank, has notified the Exchange that the bank will now move on to complete the post-acquisition process.

The clearance came on the heels of favourable analysts’ review of the transaction. Financial and investment analysts across a broad spectrum of leading Nigerian and international investment companies said the acquisition holds significant positive prospects.

The analysts said the acquisition has placed Skye Bank as a bank to watch given the immense potential and synergies that the bank could extract from the acquisition to further entrench its commercial banking operations and extended its branch network.

According to analysts, the acquisition could significantly impact on the performance of the bank and further reconfigure the Nigerian banking with expectations that Skye Bank, which has already been designated as one of Nigeria’s eight systemically important banks, will move on to the topmost rank of the banking industry. Skye Bank is expected to move the ladder up in all measurable indices – size, spread, strength, resistance, profitability and returns.

Analysts were unanimous that with detailed and seamless execution of post-acquisition integration, there would be considerable values from the acquisition in terms of Skye Bank’s reach and assets as the bank leapfrogs on the back of this to become one of the biggest and largest banks in the country in terms of branch network.

Kato Mukuru, Partner and Head of Equity Research at Exotix Partners LLP, said the deal was a major positive step for Skye Bank.

According to him, while it may be too early to fully review the financial impact of the transaction, there is no doubt that the acquisition represented a major leap for Skye Bank.

“While we do not have enough detail on the transaction to comment on the financial impact, but I can safely say that this deal is nothing short of transformational for Skye Bank and if executed well, it could put them in a position to enter the elite group of tier 1 banks,” said Mukuru.

Exotix is a major global finance and investment companies with considerable imprints in world and Africa’s commercial centres. It coordinates its global operations through five major offices in London, New York, Lagos, Dubai and Nairobi.

“Scale is critical to banking in Nigeria and we all know that this acquisition fills a major regional gap – the North, in Skye Bank’s current distribution,” said Mukuru.

Head of research and intelligence at BGL Plc, Mr. Femi Ademola, said the acquisition could enhance the performance of Skye Bank noting that there are substantial values and synergies that could come in terms of spread and reach and deposit assets.

“I think the acquisition is very positive for Skye Bank Plc,” Ademola said.

According to him, “the acquisition will improve the Skye Bank’s capital adequacy and liquidity ratios since most of the Mainstreet Bank’s assets are invested in very liquid assets. Consequently, it is expected that the acquisition will also help to boost the Skye Bank’s profitability, going forward”.

Group head, research, Lead Capital Plc, Sadiq Waziri, said the most significant gains to Skye Bank would come in terms of the expanded branch network and the resultant increase in customers, particularly savings and current account depositors, which are the cheapest form of deposits.

“Mainstreet Bank was formally Afribank, which was established in 1959; the bank is endowed with a lot physical assets – properties in prime areas, which Skye Bank would benefit from,” Waziri said.

Head, Trade Execution, Securities Africa Financial Limited, Akinkunmi Popoola, pointed out that the bigger branch network would enable Skye Bank to mobilize more low cost deposits and enhance its lending capacity, which will translate to improvement in loan-deposit ratio as the bank can rely more on its own deposits to grant loans to its customers.

“This is helpful at a time like this when liquidity of banks generally is threatened by the raising of Cash Reserve Requirement (CRR) on public funds by the Central Bank of Nigeria (CBN),” Popoola said.

“Investors and shareholders should expect to see value creation in form of capital appreciation and improved dividend because ultimately the bigger Skye Bank should be able to post decent profit going forward. The banking sector will also benefit as the development is expected to emphasize the banking sector as the preferred sector by prospective investors,” Popoola said